HOMEWORK No4: FINANCIAL STATEMENT

I Financial statements quiz

1. Which accounting method will result in financial statements that report a more complete
picture of a corporation’s financial position and a better measure of profitability during a recent
accounting year?
a. Accrual Method
b. Cash Method
2. Which type of journal entries are made at the end of each accounting period so that the
financial statements better reflect the accrual method of accounting?
a. Adjusting
b. Closing
c. Reversing
4. Which financial statement will allow you to determine the gross margin for a retailer or
manufacturer?
a. Balance Sheet
b. Income Statement
c. Statement Of Cash Flows
d. Statement Of Comprehensive Income
e. Statement Of Stockholders’ Equity
5. Does the heading of a balance sheet indicate a period of time or a point in time?
a. Period Of Time
b. Point In Time
6. A corporation's net income will cause a change in which component of stockholders' equity?
Accumulated Other Comprehensive Income
a. Paid-in Capital
b. Retained Earnings
7. Which financial statement's structure is closest to that of the basic accounting equation?
a. Balance Sheet
b. Income Statement
c. Statement Of Cash Flows
d. Statement Of Comprehensive Income
e. Statement Of Stockholders’ Equity
8. Is it true or false that a grocery store’s sale of its old delivery van to one of its employees for
$2,000 should be recorded in the general ledger account Sales?
a. True
b. False
9. Is it true or false that the total amount of stockholders’ equity reported on the balance sheet is
intended to show the fair market value of the corporation?
a. True
b. False
10. Comprehensive income is defined as _______________ plus other comprehensive income.
a. Extraordinary Items
b. Gains And Losses
c. Net Income
11. Which financial statement reports the adjustments for changes in the market value of
available-for-sale investment securities and adjustments for foreign currency translation?
a. Statement Of Cash Flows
b. Statement Of Comprehensive Income
c. Statement Of Income
12. Ten years ago, a corporation started a new brand name that is now considered to be its most
valuable asset. On which financial statement and at what amount will you see the brand name
reported?
a. Balance Sheet At Its Present Value
b. Statement Of Comprehensive Income With No Value
c. Not Reported On A Financial Statement
13. A corporation's working capital is calculated using which amounts?
a. Total Assets and Total Liabilities
b. Total Assets and Current Liabilities
c. Current Assets and Current Liabilities
14. The changes that occurred during a recent year in the accounts Retained Earnings and
Treasury Stock will be found in which financial statement?
a. Balance Sheet
b. Income Statement
c. Statement Of Cash Flows
d. Statement Of Comprehensive Income
e. Statement Of Stockholders’ Equity
15. The amount spent for capital expenditures will be reported in which section of the statement
of cash flows?
a. Cash Provided/used In Financing Activities
b. Cash Provided/used In Investing Activities
c. Cash Provided/used In Operating Activities
d. Supplemental Information
16. Which of the following will appear as a negative amount on a statement of cash flows that
was prepared using the indirect method?
a. A Decrease In Inventory
b. An Increase In Accounts Payable
c. An Increase In Accounts Receivable
d. Depreciation Expense
17. Which of the following will appear as a positive amount on a statement of cash flows that
was prepared using the indirect method?
a. An Increase In Accounts Receivable
b. An Increase In Inventory
c. A Decrease In Accounts Payable
d. Depreciation Expense
18. What is usually presented first in the notes to the financial statements?
a. Accumulated Other Comprehensive Income
b. Commitments And Contingencies
c. Significant Accounting Policies
19. Important disclosures regarding likely losses that could not be estimated are found where?
a. General Ledger Accounts
 b. Income Statement
c. Notes To The Financial Statements
II Translate into Vietnamese

Why Do Shareholders Need Financial Statements?

By J.B. MAVERICK

Updated May 12, 2021

Reviewed by ANDY SMITH
Financial statements provide a snapshot of a corporation's financial health at a particular point
in time, giving insight into its performance, operations, cash flow, and overall
conditions. Shareholders need them to make informed decisions about their equity investments,
especially when it comes time to vote on corporate matters.

There are a variety of tools shareholders have at their disposal to make these equity evaluations.
In order to make better decisions, it is important for them to analyze their stocks using a variety
of measurements, rather than just a few. Some of the metrics available include profitability
ratios, liquidity ratios, debt ratios, efficiency ratios, and price ratios.

KEY TAKEAWAYS
 Financial statements provide a snapshot of a corporation's financial health, giving insight
into its performance, operations, and cash flow.
 Financial statements are essential since they provide information about a company's
revenue, expenses, profitability, and debt.
 Financial ratio analysis involves the evaluation of line items in financial statements to
compare the results to previous periods and competitors.

Understanding the Need for Financial Statements

Financial statements are the financial records that show a company's business activity and
financial performance. Companies are required to report their financial statements on a
quarterly and annual basis by the U.S. Securities and Exchange Commission (SEC) . The SEC
monitors the markets and companies to ensure that everyone is playing by the same rules and
that markets function efficiently. There are specific guidelines that are required by the SEC
when issuing financial reports so that investors can analyze and compare one company with
another easily.

Financial statements are important to investors because they can provide enormous information
about a company's revenue, expenses, profitability, debt load, and the ability to meet its short-
term and long-term financial obligations. There are three major financial statements.
Balance Sheet
The balance sheet shows a company's assets (what they own), liabilities (what they owe), and
stockholders' equity (or ownership) at a given moment.

Income Statement
The income statement reports the revenue generated from sales, the operating expenses
involved in creating that revenue as well as other costs, such as taxes and interest expense on
any debt on the balance sheet. The net amount or the bottom line of the income statement is
the net income or the profit for the period. Net income is revenue minus all of the costs of doing
business.

Cash Flow Statement

The cash flow statement (CFS) measures the cash generated for a period, including all of the
transactions that added to or subtracted from cash. Cash flow is important because it shows how
much cash is available to meet short-term obligations, invest in the company, or to
pay dividends to shareholders. Dividends are typically cash payments to shareholders as a perk
for investing the company.

Financial Ratios
Financial ratios help investors break down the enormous amount of financial data that's reported
by companies. A ratio is merely a metric to help analyze the data and make useful comparisons
with other companies and other reporting periods.

Financial ratio analysis analyzes specific financial line-items within a company's financial
statements to provide insight as to how well the company is performing. Ratios determine
profitability, a company's indebtedness, the effectiveness of management, and operational
efficiency.

It's important to consider that the results from financial ratios are often interpreted differently by
investors. Although financial ratio analysis provides insight into a company, they should be
used in tandem with other metrics and evaluated against the overall economic backdrop. Below
are some of the most common financial ratios that investors use to interpret a company's
financial statements.
Profitability Ratios
Profitability ratios are a group of financial metrics that show how well a company
generates earnings compared to its associated expenses. However, investors should take care not
to make a general comparison. Instead, they will get a better sense of how well a company is
doing by comparing ratios of a similar period. For example, comparing the fourth quarter of this
year with the same quarter from last year will net a better result.
Return on Equity
Return on equity, or ROE, is a common profitability ratio used by many investors to calculate a
company's ability to generate income from shareholders' equity or investments. Companies
issue shares of stock to raise capital and use the money to invest in the company. Shareholders'
equity is the amount that would be returned to shareholders if a company's assets were
liquidated, and all debts were paid off. The higher the return or ROE, the better the company's
performance since it generated more money per each dollar of investment in the company.
Operating Margin
Operating profit margin evaluates the efficiency of a company's core financial
performance. Operating income is the revenue generated from a company's core business
operations. Although operating margin is the profit from core operations, it doesn't include
expenses such as taxes and interest on debt.
As a result, operating margin provides insight as to how well a company's management is
running the company since it excludes any earnings due to ancillary or exogenous events. For
example, a company might sell an asset or a division and generate revenue, which would inflate
earnings. Operating margin would exclude that sale. Ultimately, the operating profit is the
portion of revenue that can be used to pay shareholders, creditors, and taxes.
Liquidity Ratios
Liquidity ratios help shareholders determine how well a company handles its cash flow and
short-term debts without needing to raise any extra capital from external sources, such as a debt
offering.
Current Ratio
The most commonly used liquidity ratio is the current ratio, which reflects current
assets divided by liabilities, giving shareholders an idea of the company's efficiency in using
short-term assets to cover short-term liabilities. Short-term assets would include cash
and accounts receivables, which is money owed to the company by customers.
Conversely, current liabilities would include inventory and accounts payables, which are short-
term debts owed by the company to suppliers.
Higher current ratios are a good indication the company manages its short-term liabilities well
and generates enough cash to run its operation smoothly. The current ratio generally measures if
a company can pay its debts within a 12-month period. It can also be useful in providing
shareholders with an idea of the ability a company possesses to generate cash when needed.
Debt Ratios
Debt ratios indicate a company’s debt situation and whether they can manage their outstanding
debt as well as the debt servicing costs, such as interest. Debt includes borrowed funds from
banks but also bonds issued by the company.
Bonds are purchased by investors where companies receive the money from the bonds upfront.
When the bonds come due–called the maturity date–the company must pay back the amount
borrowed. If a company has too many bonds coming due in a specific period or time of the year,
there may not be enough cash being generated to pay the investors. In other words, it's
important to know that a company can pay its interest due on their debt, but also it must be able
to meet its bond maturity date obligations.
Debt-to-Equity Ratio
The debt-to-equity ratio measures how much financial leverage a company has, which is
calculated by dividing total liabilities by stockholders' equity. A high debt-to-equity ratio
indicates a company has vigorously funded its growth with debt. However, it's important to
compare the debt-to-equity ratios of companies within the same industry. Some industries are
more debt-intensive since they need to buy equipment or expensive assets such as
manufacturing companies. On the other hand, other industries might have little debt, such as
software or marketing companies.
Interest-Coverage Ratio
The interest coverage ratio measures the ease with which a company handles interest on its
outstanding debt. A lower interest coverage ratio is an indication the company is heavily
burdened by debt expenses.
Efficiency Ratios
Efficiency ratios show how well companies manage assets and liabilities internally. They
measure the short-term performance of a company and whether it can generate income using its
assets.
Inventory Turnover
The inventory or asset turnover ratio reveals the number of times a company sells and replaces
its inventory in a given period. The results from this ratio should be used in comparison to
industry averages. Low ratio values indicate low sales and excessive inventory, and therefore,
overstocking. High ratio values commonly indicate strong sales and good inventory
management.
Valuation Ratios
Price ratios focus specifically on a company's stock price and its perceived value in the market.
The price/earnings (or P/E) ratio is an evaluation metric comparing the current share price of a
company’s stock with its per-share earnings. Higher P/E values indicate investors expect
continued future growth in earnings. However, a P/E that's too high could indicate that the stock
price is too high relative to the earnings or profit being generated. Investors use the P/E ratio to
evaluate whether the stock price is fairly valued, overvalued, or undervalued.
The P/E ratio is most helpful when compared to historical P/Es of the same company and
companies within the same industry.
Dividend Yield
The dividend yield ratio shows the amount in dividends a company pays out yearly in relation to
its share price. The dividend yield provides investors with the return on investment from
dividends alone. Dividends are important because many investors, including retirees, look for
investments that provide steady income. Dividend income can help offset, at least in part, losses
that might occur from owning the stock. Essentially, the dividend yield ratio is a measurement
for the amount of cash flow received for each dollar invested in equity.
The Bottom Line
There is no one indicator that can adequately assess a company's financial position and potential
growth. That is why financial statements are so important for shareholders and market analysts
alike. These metrics (along with many others) can be calculated using the figures released by a
company on its financial statements.

### Dịch sang tiếng Việt:

**Tại sao cổ đông cần báo cáo tài chính?**

Bởi J.B. Maverick
Cập nhật ngày 12 tháng 5, 2021
Được xem xét bởi Andy Smith

Báo cáo tài chính cung cấp một cái nhìn tổng quan về sức khỏe tài chính của một công ty tại một
thời điểm cụ thể, giúp hiểu rõ về hiệu suất hoạt động, dòng tiền, và điều kiện tổng thể của công
ty. Cổ đông cần chúng để đưa ra các quyết định sáng suốt về khoản đầu tư vốn chủ sở hữu của
mình, đặc biệt khi đến lúc bỏ phiếu cho các vấn đề liên quan đến công ty.
Có nhiều công cụ mà cổ đông có thể sử dụng để đánh giá cổ phiếu của mình. Để đưa ra quyết
định tốt hơn, điều quan trọng là họ phải phân tích cổ phiếu của mình bằng nhiều tiêu chí khác
nhau, thay vì chỉ sử dụng vài chỉ số. Một số tiêu chí có sẵn bao gồm tỷ lệ sinh lợi, tỷ lệ thanh
khoản, tỷ lệ nợ, tỷ lệ hiệu quả và tỷ lệ giá.

**Ý chính**
- Báo cáo tài chính cung cấp cái nhìn tổng quan về sức khỏe tài chính của một công ty, giúp hiểu
rõ hiệu suất, hoạt động và dòng tiền của công ty.
- Báo cáo tài chính rất quan trọng vì chúng cung cấp thông tin về doanh thu, chi phí, lợi nhuận và
khoản nợ của công ty.
- Phân tích tỷ lệ tài chính liên quan đến việc đánh giá các khoản mục trên báo cáo tài chính để so
sánh kết quả với các kỳ trước và các đối thủ cạnh tranh.

### Hiểu nhu cầu cần có báo cáo tài chính

Báo cáo tài chính là các hồ sơ tài chính cho thấy hoạt động kinh doanh và hiệu suất tài chính của
một công ty. Các công ty phải báo cáo báo cáo tài chính hàng quý và hàng năm theo quy định
của Ủy ban Chứng khoán và Giao dịch Hoa Kỳ (SEC). SEC giám sát các thị trường và các công
ty để đảm bảo mọi người đều tuân thủ cùng một quy tắc và đảm bảo các thị trường hoạt động
hiệu quả. Có những hướng dẫn cụ thể mà SEC yêu cầu khi phát hành báo cáo tài chính để các
nhà đầu tư có thể phân tích và so sánh các công ty một cách dễ dàng.

Báo cáo tài chính rất quan trọng đối với các nhà đầu tư vì chúng có thể cung cấp nhiều thông tin
về doanh thu, chi phí, lợi nhuận, gánh nặng nợ của công ty và khả năng đáp ứng các nghĩa vụ tài
chính ngắn hạn và dài hạn. Có ba báo cáo tài chính chính:

1. **Bảng cân đối kế toán**

Bảng cân đối kế toán hiển thị tài sản (những gì công ty sở hữu), nợ phải trả (những gì công ty
nợ) và vốn chủ sở hữu của cổ đông (quyền sở hữu) tại một thời điểm nhất định.

2. **Báo cáo kết quả hoạt động kinh doanh**

Báo cáo kết quả hoạt động kinh doanh ghi lại doanh thu từ việc bán hàng, các chi phí vận hành
liên quan đến việc tạo ra doanh thu đó cũng như các chi phí khác như thuế và chi phí lãi vay từ
khoản nợ trên bảng cân đối kế toán. Kết quả cuối cùng hoặc lợi nhuận của báo cáo là lợi nhuận
ròng của kỳ.

3. **Báo cáo lưu chuyển tiền tệ**

Báo cáo lưu chuyển tiền tệ đo lường số tiền mặt phát sinh trong một kỳ, bao gồm tất cả các
giao dịch đã tăng hoặc giảm tiền mặt. Dòng tiền rất quan trọng vì nó cho thấy số tiền có sẵn để
đáp ứng các nghĩa vụ ngắn hạn, đầu tư vào công ty hoặc trả cổ tức cho cổ đông.

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